Sole traders, partnerships and limited companies all have different users who need financial information for different purposes. Discuss.

Q4 Classify the following as an income, an expense, an asset, or a liability:

(a) Friend owes business money

(b) Football club’s gate receipts

c) Petrol used by a car

d) Photocopier

e) Sales

f) Telephone bill outstanding g) Long-term loan h) Cash i) Wages

(j) Capital

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Q5 State whether the following are true or false. If false, explain why.

(a) Assets and liabilities show how much the business owns and owes.

(b) The profit and loss account shows the income, expenses and thus the net assets of a business.

(c) Stewardship is now recognised as the primary objective of financial accounting.

(d) When running a small business the owner must be careful to separate business from private expenditure.

(e) The matching and prudence accounting concepts sometimes conflict.